It has been said that real progress for the American people in the wake of the Great Recession and the dislocation and hardship it has caused will come from the ground up. Communities will come together to take command of their own destinies. People will stop waiting for a solution from big government or big business.
Thatís why an array of commentators has seen in the distress of Americaís cities a crucible for future progress. The bankruptcy of Detroit has brought out paeans to the strength and durability of the people and the potential for the city to pull itself up. Other cities have started to do so, including hard-hit Rust Belt centers that are rich in history and culture, such as Pittsburgh and Cleveland and Youngstown, Ohio.
What it takes is a willingness to challenge the powers that be. An inspiring example was the topic of a story in The New York Times on Tuesday. Richmond, Calif., is a gritty working-class town in the East Bay across from San Francisco. About half of the home mortgages there are under water, meaning homeowners owe more on their mortgages than the homes are now worth.
Many of the mortgages burdening those homeowners were of the predatory variety, peddled during the housing boom and securitized to pass on the poison of bad loans to the securities markets. Foreclosures and overhanging debt remain a burden for a huge number of Richmond residents. So the city of Richmond has a plan for doing something about it.
The city hopes to seize underwater mortgages by eminent domain and then to allow the homeowners to refinance at an affordable and lower price. It is a brilliant scheme, and of course, it is opposed by the banking industry.
Eminent domain is the mechanism that allows cities to seize private property for the public good. If a city or state intends to build a highway, but your house stands in the way, it has the right to seize your property, with compensation. In recent years, cities have also used eminent domain for private interests, taking houses to clear the way for a private developer to build a mall or other profit-making venture. It is a dubious use of eminent domain, but it has received the approval of the courts.
If eminent domain is permissible for the good of the community, what better use could it have than to save the community by seizing and renegotiating bad loans? In this case, it is a satisfying turning of the tables.
During the financial crisis, one side of the loan debacle, the banks, was rescued. The other side, the borrowers, was left to flounder. Richmondís plan would go a long way to redress that imbalance.
Ordinarily, those with money and power use eminent domain to advance their interests, in the name of the community. In this case, those without power, except the power that inherently belongs to the people, would use it to seize mortgages from those who are holding the community in debt bondage.
The burden of debt continues to create enormous disequilibrium within the economy and society. People are burdened with mortgage debt, student loan debt, credit card debt. Often the debt piled up as a result of predatory lending or as a result of efforts merely to keep up. Sometimes debt was incurred irresponsibly ó for example, by speculators hoping to churn real estate or by people out of their depth.
The effect of debt is to make people slaves to their creditors ó like the coal miner who owes his soul to the company store whose wages are dutifully returned to the company. The creditors are happy to continue taking our money, which is why they are opposing Richmondís eminent domain scheme.
And yet in numerous ways across the country communities are taking steps to reclaim their destiny from predatory institutions. Vermontís health care initiatives fall into that category. Fostering of a local food economy serves the goal of gaining independence from big agriculture. Letís cheer Richmondís efforts to give the banks some of their own medicine and to force them to share in the misery they have been complicit in creating.MORE IN Editorials
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